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Tobacco Company of America is a very stable billion-dollar company with sales growth of about 5 percent per year in good or bad economic conditions. Because of this stability (a correlation coefficient with the economy of +.3 and a standard deviation of sales of about 5 percent from the mean), Mr. Weed, the vice-president of finance, thinks the company could absorb some small risky company that could add quite a bit of return without increasing the company's risk very much. He is trying to decide which of the two companies he will buy. Tobacco Company of America's cost of capital is 10 percent.
A firm buys on terms of 2/8, net 45 days, it does not take discounts, and it actually pays after 58 days. What is the effective annual percentage cost of its non-free trade credit? (Use a 365-day year.)
Discuss the lower bound for option prices and the put-call parity with and without dividend yields; and explain why.
Daniel's Fine Foods has revenue of $1,200,000. The firm has profit margins of 12%. Use the information below to build a complete income statement in proper form.
Calculate the NPV in U.S. dollars. (Show all calculations and ignore working capital)
The market consists of the following stocks. Their prices and number of shares are as follows:
Park Place will provide $370,000 per year in cash flow (aftertax income plus depreciation) for the next 25 years. If Boardwalk Corporation has a cost of capital of 13 percent. Use Appendix D.
What is the current strategic plan for DaimlerChrysler?
Firm decides to recapitalize to take advantage of tax shield and firm's marginal tax rate is 40%. After a substantial borrowing, firm's cost of equity goes up to 10%.
Further, you expect that real interest rates will be 3.00 percent annually for the foreseeable future. What is the maturity risk premium on the 6-year Treasury security?
What is the likely impact of this policy on Asian foreign exchange reserves? On Asian inflation? On Asian export competitiveness? On Asian living standards?
What is the standard deviation of a portfolio composed of equal proportions of gold and stocks?
Using the financial statements of Landry's Restaurants located in Appendix A of the text, Fundamentals of Financial Accounting 1st ed., by Phillips, Libby, and Libby, calculate the given ratios for 2002 and 2003:
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